Trump's Tariff Threat Shakes Global Markets Over China, Mexico, and Canada
President-elect Donald Trump sent shockwaves around global markets after announcing a strong tariff threat against China, Mexico, and Canada. According to reports, Trump said he will slap an extra 10 percent tariff on products imported from China, while all products from Mexico and Canada will attract 25 percent tariffs. The tariffs are to come into effect shortly after he assumes office. The announcement, made via Trump's Truth Social platform, set off significant market fluctuations: the Canadian dollar dropped to its weakest in four years and Mexico's peso to its weakest point since 2022, while China's yuan lost a tiny bit offshore.
A message from Trump isn't new as he turns his focus toward what he says is an urgent need to address illegal immigration and drug trafficking. In his posts, Trump specifically called out China for its failure to curb fentanyl trafficking, accusing the country of allowing drugs to flow into the United States. "Until such time as they stop, we will be charging China an additional 10% Tariff, above any additional tariffs, on all of their many products coming into the United States," Trump stated.
Similarly, Trump accused Mexico and Canada of giving room for the trafficking of illegal drugs into the U.S. as well as migrants, coupling this with the increasing crime rate in the country. As part of the new trade policy, he promised to impose a 25% duty on all imports from the countries. According to him, the tariff would persist as long as the flow of drugs, particularly fentanyl as well as illegal immigrants continues.
This has caused worry among business leaders who fear the economic consequences of extended trade tensions. While Trump's former policies on tariffs against China did cause distortion in global trade, this new threat to the U.S.'s northern and southern neighbors escalates the situation further. Some analysts had predicted Trump would go soft during a potential second term especially after his appointment of Scott Bessent as the next U.S. Treasury Secretary. On one level, Bessent's appointment was interpreted as a hopeful clue that Trump might adopt a more nuanced trade stance.
Representations from China, Canada, and Mexico have yet to comment. Trump's aggressive position on trade, however, will be affecting global markets, as the economic ripple effects of the tariffs make their way from shore to shore. Whether exemption will be applied or not, or further negotiation from the U.S. side with the trade partners, remains to be seen.
